Apple's Newton Poised for a Rebirth

By JOHN MARKOFF

Published: September 18, 1995

SAN FRANCISCO, Sept. 17—
The Newton, Apple's hand-held computer, is on the brink of a second life, and industry analysts who have seen prototypes say the new version comes significantly closer to meeting its original promise than the first model, which was widely derided as John Sculley's folly.

At a closed meeting for about 400 software developers in San Francisco early this month, Apple Computer Inc. introduced new Newton software. People close to the company said the new operating system, called the Newton OS 2.0, will go on sale in November.

People who have used the new Newton say it does a better job of recognizing handwritten input, exchanges data with desktop computers more efficiently and has an improved user interface.

But the personal digital assistant or P.D.A., is still a technology in search of a market.

"In the long run there is no doubt people will carry around small computers much like pagers today," said Amy Wohl, president of Wohl Associates, a Narberth, Pa., consulting group. "But it's still not clear that Apple will be one of the major providers of these systems."

One thing in the Newton's favor is that many competitors have nearly abandoned the fight.

But Apple has yet to articulate a clear marketing vision for the product, which it unsuccessfully tried to position as a jack-of-all-trades for computer applications.

The Newton division at Apple does not have a leader with a marketing background and is being temporarily run by Sandy Benett, a former Go Corporation engineer. "We're much alive and well, but we don't like to talk about numbers," Mr. Benett said. "We set expectations at the astronomical level, and we've taken the attitude that we're not going to talk about them for now."

Apple's last public statement about Newton sales was in January 1994 when it said it had sold 80,000 Newtons -- roughly a third of the hand-held computers that were sold in 1993, according to Dataquest, a San Jose, Calif., market research company. In 1994, Dataquest said, Apple's share of the market fell to 15 percent of the 389,000 P.D.A.'s sold.

The Newton was promoted as a computer that could recognize handwriting but its performance disappointed most people who tried it, even aficionados willing to spend hours trying to train the system to recognize their individual scrawl.

After failing in the broader consumer market, Apple offered the Newton for specialized business, medical and educational applications, with limited success. For example, at Disney World, the Newton is used for surveys of people's reactions to amusement rides.

Several new features available with the Newton may add momentum to the machine, which has largely been a curiosity. Motorola Inc. this week, for example, began shipping wireless modem cards that will permit the Newton and other personal computers to send and receive E-mail.

People who have used the new operating system say it includes a new character recognizer that is a substantial improvement over the word-based recognition system built into the current Newton. The new software was developed by a team led by Richard Lyon, a researcher at both Schlumberger Ltd. and the Xerox Corporation's Palo Alto Research Center and now a member of Apple's advanced technology group.

Apple, which has introduced three models, is readying a fourth version called the Newton 150, which may be go on sale the first quarter of 1996.

The new model is reported to be smaller than the existing Newtons and will have an optional backlighted display. Lack of readability is a problem that plagued the original Newton. Apple is also working on a larger format slate-size version of the Newton. Panasonic, a unit of the Matsushita Electric Industrial Company, is reported to be working on a similar product.

Yet just how strongly Apple is committed to the Newton remains an open question. The Apple board, at a meeting scheduled for early next month, is expected to evaluate the potential of several of the money-losing ventures started when Mr. Sculley was chairman. In addition to the Newton, Apple's E-World on-line service could be be shut down or sold.

If the board remains committed, several analysts say the Newton may be one of the survivors in the troubled market. "As long as Apple remains committed to the platform, they stand to inherit the market," said Roger McNamee, a director of Integral Partners, a Palo Alto, Calif., investment company.

Apple is also making available software that Macintosh and Windows software developers can use to make it easier to share data between their programs and the Newton.

"Our market research has told us people don't want to take their desktop computer with them but they want to take their data with them," Mr. Benett said.

Photo: Customers in Manhattan at the Newton Source store recently tested Apple's revised hand-held computer. Users say it recognizes handwriting better and exchanges data with desktop computers more efficiently. (Philip Greenberg for The New York Times)